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Fortress Caribbean Property Fund Limited | Information Memorandum 1
2 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund LimitedInformation Memorandum
2 for 3 Rights Issue of 22,326,840 Class “A” Common
Property Fund Shares at Bds$1.40 per Share
IMPORTANT NOTICE
Please consult your financial adviser or attorney-at-law if you do not fully understand the contents of
this information memorandum or if you have any queries concerning this information memorandum.
Lead Stockbroker:
Manager to the Issue:
Fortress Fund Managers Limited
Dated: October 3rd, 2005
A copy of this document has been registered with the Registrar of Companies in Barbados in accor-
dance with the provisions of the Companies Act Cap 308 of the laws of Barbados and has also been
filed with the Securities Commission. The Fund is an authorised mutual fund licensed under the
Mutual Funds Act, 2002-22. The Registrar of Companies and The Securities Commission of Barbados
and the Barbados Stock Exchange Inc. take no responsibility as to the validity or the veracity of the
contents of this information memorandum.
The Stock Exchange and Securities Commission in Barbados have not in any way evaluated the merits
of the securities offered hereunder and any representation to the contrary is an offence.
No person receiving a copy of this document in any territory may treat this document as constituting
an invitation to him or her to purchase or subscribe for any shares nor should he or she in any event
purchase or subscribe for any shares unless in the relevant territory such an invitation could lawfully
be made to him or her without offeror’s compliance with any registration or other legal requirements.
Any person wishing to subscribe for shares should satisfy himself or herself that, in doing so, he or she
complies with the laws of any relevant territory, and that he or she obtains any requisite governmental
or other consents and observes any other applicable formalities.
No money should be paid to any financial intermediary in Barbados who is not a licensed mutual
fund administrator or the agent duly appointed under Part IV of the Mutual Fund Regulations or
intermediary licensed under the Securities Act, 2001-13.
Be A Part of The Exciting Caribbean Property Market.
Benefits to Investors
Within the equity investment environment of
Barbados, the Directors believe that the Fund
offers an attractive combination of benefits
to investors:
• Opportunity that allows every investor, from the large financial institution to the small individual investor, to participate in the rapidly growing real estate market in the Caribbean;
• 11.4% annual compound rate of return since launch in 1999 including the effect of warrants;
• Regular flow of income in the form of annual dividends;
• Risk management through a diversified portfolio of real estate holdings;
• Taxation benefits of the Fund, which include no corporation tax on income designated for the shareholders;
• $10,000 reduction in taxable income for individual shareholders resident in Barbados, plus a further $7,500 deduction where such investment is made out of annual bonus;
• Professional management and investment advice from reputable professionals;
• Exchange control benefits for CARICOM
shareholders.
Fortress Caribbean Property Fund Limited | Information Memorandum 1
THE OFFER
2 for 3 Rights Issue of 22,326,840 Class “A” Common Property Fund Shares
at Bds$1.40 per Share
At a meeting of the Board of Directors of the Fortress Caribbean Property Fund Limited (“the Fund”) held on June 1st, 2005, it was resolved to
offer for subscription and issue 22,326,840 of the unissued Class “A” common property fund shares of the Fund, at Bds$1.40 each, to existing
shareholders in the proportion in which they hold this class of shares at the Record Date of the Offer.
Persons who are not currently shareholders in the Fund may also participate in the issue by purchasing rights via the Barbados Stock Exchange on the designated trading days noted in Section 1.2.. Non shareholders who are interested in purchasing such rights should contact their broker as soon as possible in this regard. Alternatively application can be made to Fortress Fund Managers Limited to purchase shares issued persuant
to the rights issue subject to availability of rights not taken up.
This document contains particulars given in compliance with the regulations of the Board of the Barbados Stock Exchange (BSE), the Mutual Funds
Act 2002-22, the Securities Act 2001-13 and the Companies Act Cap 308, for the purpose of giving information to the public with regard to the
Fund. The Directors, whose names appear below, collectively and individually, accept full responsibility for the accuracy of the information given
and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no facts, the omission of which would
make any statement herein misleading.
This offer opens on October 3rd, 2005 at 9:00 am and expires at 5:00 pm on October 28th, 2005.
The Offer
R. Geoffrey Cave- Chairman
Paul Altman
Dr. Trevor Carmichael
Maureen Davis
Christopher de Caires
Terry Hanton
2 Fortress Caribbean Property Fund Limited | Information Memorandum
CONTENTS PAGE
1. DEFINITIONS AND TIMETABLE ..................................................................................................................................................................4 1.1. DEFINITIONS .........................................................................................................................................................................................4 1.2. TIMETABLE ...........................................................................................................................................................................................42. SHARE CAPITAL ...........................................................................................................................................................................................53. DIRECTORS ...................................................................................................................................................................................................64. LETTER FROM THE CHAIRMAN ...................................................................................................................................................................85. DETAILS OF THE OFFER ...............................................................................................................................................................................9 5.1. TERMS OF THE RIGHTS ISSUE ...............................................................................................................................................................9 5.2. ACTION TO BE TAKEN – Procedure for Acceptance and Payment ..........................................................................................................9 5.3. ACTION TO BE TAKEN – Procedure for Sale or Renunciation of New Shares Entitlement .......................................................................9 5.4. PROCEDURE FOR RIGHTS NOT TAKEN UP – “EXCESS SHARES” ..........................................................................................................10 5.5. COMMITTED PARTIES OR THEIR NOMINEES ...........................................................................................................................................10 5.6. CONFIRMATION OF ALLOTMENTS AND OVER SUBSCRIPTION REFUNDS .............................................................................................10 5.7. POSTING ............................................................................................................................................................................................10 5.8. LEAD STOCK BROKER AND MANAGER CONTACT INFORMATION ......................................................................................................106. PROSPECTS ................................................................................................................................................................................................11 6.1. NEW INVESTMENT OPPORTUNITIES ....................................................................................................................................................11 6.1.1. The CS&C Joint Venture, Barbados .............................................................................................................................................11 6.1.2. Cap Estate Residential Development, St. Lucia ............................................................................................................................12 6.1.3. Lime Grove Residential And Commercial Development, Barbados ...............................................................................................13 6.1.4. Rockley Resort Residential Development, Barbados .....................................................................................................................14 6.1.5. Holders Polo Manor Development, Barbados ..............................................................................................................................15 6.1.6. Tobago Plantation Development, Tobago ....................................................................................................................................15 6.2. IMPACT OF THE NEW INVESTMENTS ON THE FUND’S PORTFOLIO ......................................................................................................16 6.3. CARIBBEAN REAL ESTATE OUTLOOK ..................................................................................................................................................177. RISK FACTORS ...........................................................................................................................................................................................178. FINANCIAL HISTORY .................................................................................................................................................................................19 8.1. CURRENT REAL ESTATE PORTFOLIO ....................................................................................................................................................19 8.2. FUND PERFORMANCE ........................................................................................................................................................................22 8.3. AUDITORS’ REPORT ............................................................................................................................................................................24 8.4. STATEMENTS OF INCOME: 2000 - 2004 .............................................................................................................................................25 8.5. BALANCE SHEETS: 2000 - 2004 .........................................................................................................................................................26 8.6. STATEMENTS OF CASH FLOWS: 2000 - 2004 .....................................................................................................................................27 8.7. PRICEWATERHOUSECOOPERS’ LETTER ON THE UNAUDITED INTERIM FINANCIAL STATEMENTS .........................................................28 8.8. STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 2005 - UNAUDITED .....................................................................29 8.9. BALANCE SHEET AS OF JUNE 30, 2005 - UNAUDITED ........................................................................................................................30 8.10. STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2005 - UNAUDITED ...........................................................31
Contents
Fortress Caribbean Property Fund Limited | Information Memorandum 3
Contents cont’dCONTENTS CONT’D PAGE
9. FUND HISTORY AND PROFILE ...................................................................................................................................................................32 9.1. FORTRESS CARIBBEAN PROPERTY FUND LIMITED ...............................................................................................................................32 9.1.1. Type of Fund ..............................................................................................................................................................................32 9.1.2. The Fund Objective .....................................................................................................................................................................32 9.1.3. Fund Manager ............................................................................................................................................................................32 9.1.4. Investment Adviser .....................................................................................................................................................................32 9.1.5. Property Manager ......................................................................................................................................................................32 9.1.6. Investment Committee ...............................................................................................................................................................33 9.1.7. Registrar, Secretary and Transfer Agent .......................................................................................................................................33 9.1.8. Independent Valuers ..................................................................................................................................................................33 9.2. INVESTMENT GUIDELINES ...................................................................................................................................................................33 9.2.1. Investment Size and Return ........................................................................................................................................................33 9.3. THE INVESTMENT PROCESS ................................................................................................................................................................34 9.3.1. Investment Sourcing ...................................................................................................................................................................34 9.3.2. Investment Evaluation ................................................................................................................................................................34 9.3.3. Property Management and Monitoring .......................................................................................................................................34 9.3.4. Divestment .................................................................................................................................................................................34 9.3.5. Valuation Policy ..........................................................................................................................................................................34 9.3.6. Reports and Meetings ................................................................................................................................................................35 9.3.7. Conflicts of Interest ....................................................................................................................................................................35 9.4. INVESTMENT RESTRICTIONS & BORROWING POWERS ........................................................................................................................36 9.5. TRADING IN THE FUND’S SHARES .......................................................................................................................................................36 9.6. FEES & EXPENSES ...............................................................................................................................................................................37 9.6.1. The Manager ..............................................................................................................................................................................37 9.6.2. The Investment Adviser ..............................................................................................................................................................37 9.6.3. The Independent Valuer .............................................................................................................................................................37 9.6.4. Transaction Costs .......................................................................................................................................................................37 9.6.5. Estimated Expenses of the Rights Issue .......................................................................................................................................37 9.7. DIVIDEND POLICY ...............................................................................................................................................................................37 9.8. TAXATION OF THE FUND ....................................................................................................................................................................37 9.9. TAXATION OF THE SHAREHOLDERS ....................................................................................................................................................38 9.10. FOREIGN EXCHANGE CONTROL .......................................................................................................................................................38 9.11. TAX INCENTIVES ...............................................................................................................................................................................3810. DIRECTORS OF THE FUND AND THEIR INTERESTS ................................................................................................................................3911. SUBSTANTIAL INTERESTS ........................................................................................................................................................................3912. MATERIAL CONTRACTS ...........................................................................................................................................................................3913. CONSENTS ...............................................................................................................................................................................................3914. FORMS FOR SHAREHOLDERS’ ATTENTION ............................................................................................................................................41 14.1. PROVISIONAL LETTER OF ALLOTMENT ..............................................................................................................................................41 14.2. FORM OF ACCEPTANCE – FORM A ...................................................................................................................................................43 14.3. INSTRUCTION TO SELL RIGHTS [FORM OF RENUNCIATION] – FORM B ...............................................................................................45 14.4. APPLICATION FOR EXCESS SHARES – FORM C .................................................................................................................................47
15. CORPORATE INFORMATION ....................................................................................................................................................................49
4 Fortress Caribbean Property Fund Limited | Information Memorandum
Definitions and Timetable
1.DEFINITIONS & TIMETABLE1.1. DEFINITIONS
“the Company” Fortress Caribbean Property Fund Limited
“the Fund” Fortress Caribbean Property Fund Limited
“Fund Shares” or “Shares” Class “A” Common Property Fund Shares
“New Shares” New “Class A” Common Property Fund shares issued pursuant to the exercise of this rights offer
“Excess Shares” New Shares in respect of which shareholders have not taken up their subscription rights
“the Directors” The Directors of the Company
“the Manager” Fortress Fund Managers Limited
“Investment Adviser” Altman Real Estate
“Property Manager” Property Consultancy Services Inc.
“Independent Valuer” Terra Caribbean
“BSE” Barbados Stock Exchange Inc. (formerly the Securities Exchange of Barbados)
“BCSDI” Barbados Central Securities Depository Inc.
“$”, “dollars” and “cents” The currency of Barbados
“NAV” Net Asset Value being the net value of the assets of the Fund per share
“Central Bank” Central Bank of Barbados
1.2. TIMETABLE
Year 2005
Record Date for rights issue September 30
Stock exchange dealings in subscription rights October 11, 12, 14, 18, 19, 21
Latest time for delivery of renunciation of rights October 21
Latest time for acceptance of rights and payment October 28
Confirmation of allotment of New Shares November 4
Stock exchange dealings in New Shares to commence November 8
2. SHARE CAPITALThe Fund is a Barbados based closed-end mutual fund company which invests primarily in real
estate properties in the Caribbean. As such, the Fund represents an investment opportunity
that allows everyone, from the large financial institution to the small individual investor, to
participate in the rapidly growing real estate market in Barbados and the Caribbean.
The authorized share capital of the Fund consists of an unlimited number of Class “A” common
shares and 10 Class “B” shares. The Class “A” shares have an interest in the undivided portion
of the assets of the Fund, and secure an equal share in the distribution of net income and net
capital gains. Class “B” shares are held by the Investment Adviser and the Fund Manager and
have voting rights but no rights to receive dividends or participate in any appreciation of the
Fund’s assets. The rights to these classes of shares are more fully described in Section 9.4 of this
Information Memorandum.
The Fund’s shares trade on the Barbados Stock Exchange.
The constitutive documents of the Fund are available for inspection at its principal place of
business, 1st Floor Carlisle House, Hincks Street, Bridgetown, Barbados.
Share Capital
Fortress Caribbean Property Fund Limited | Information Memorandum 5
6 Fortress Caribbean Property Fund Limited | Information Memorandum
3. DIRECTORSThe Board of Directors of Fortress Caribbean Property Fund Limited:
Mr. Geoffrey Cave, C.B.E., B.C.H.
ChairmanCave Shepherd & Co. Ltd.
Mr. Geoffrey Cave is the Chairman & Managing Director of Cave Shepherd & Co. Ltd., a public company listed on the BSE. Mr. Cave, who holds a B.Comm. from McGill University in Canada, has been the Chairman & Managing Director of Cave Shepherd for the past 30 years. Mr. Cave has had a distinguished career in business in Barbados being involved as Director and Chair-man of several of the leading public companies in Barbados.
Mr. Cave received the Caribbean Master Entrepreneur of the Year Award for the year 2000. He was also awarded the Barbados Centennial Honour by the Government of Barbados in January 2003.
Your Board of Directors
Mr. Paul Altman, B.C.H.
Managing DirectorAltman Real Estate
Mr. Paul Altman has been involved in real estate for 27 years as Managing Director of Alleyne, Aguilar & Altman Ltd. (Altman Real Estate). He has been at the forefront of developments in the luxury residential market in recent years and was instrumental in the highly successful Royal Westmoreland golf residential community where he held the post of Deputy Chairman. He is a director of Sugar Hill, a tennis based residential community. In addition to the luxury property market, Mr. Altman is involved in urban renewal programs in Speightstown, where he is Chairman of the Task Force, and in Bridgetown through his directorship with Barbados Shipping and Trading Co. Ltd. He is a past President of the Barbados National Trust.
Mr. Altman was awarded the Barbados Centennial Honour by the Government of Barbados in 2000.
Dr. Trevor A. Carmichael, Q.C., S.C.M.
PrincipalChancery Chambers
Dr. Trevor Carmichael was born in Barbados and was called to the United Kingdom Bar as a member of the Middle Temple in London and the Barbados Bar. He is a member of the International Bar Association, the Inter-American Bar Association and a Committee Member of the Inter-American Bar Foundation as well as an associate member of the Canadian Bar Association. He holds membership in the International Tax Planning Association and the International Fiscal Association, and he is the Barbados Country Chairman of the Interna-tional Litigation Committee on Business Law of the International Bar Association, as well as a former Deputy Secretary-General of that association.
Dr. Carmichael is the Principal of Chancery Chambers, a Barbados law firm engaged primarily in international and domestic law, international tax consulting, and charities.
Fortress Caribbean Property Fund Limited | Information Memorandum 7
Mrs. Maureen Davis
Chief Development OfficerDuty Free Caribbean Holdings Ltd. (DFCH)
Maureen Davis has been an executive member of the management team of Duty Free Carib-bean Holdings (DFCH) since 2000 and is responsible for leading the business develop-ment process and strategy formulation for regional growth and expansion. Her role includes the identification of emerging oppor-tunities and the continuous evaluation of exist-ing businesses and she is responsible for the negotiation, design and construction of all of the company’s projects across the region.
Mrs. Davis joined Cave Shepherd & Co. Ltd. in 1983 and has extensive retail planning and design experience spanning over twenty years. She has also been involved in the planning and execution of a number of tourism develop-ments and initiatives and played a pivotal role in the company’s environmental awareness thrust.
She is a Director of Duty Free Caribbean Holdings, the Tourism Development Corpo-ration and sits as an alternate Director of Bridgetown Cruise Terminal Inc.
Mr. Christopher de Caires, FCA, MBA
Mr. de Caires is a fellow of the Institute of Chartered Accountants of England & Wales and the Institute of Chartered Accountants of Barbados. He holds a Masters Degree in Business Administration from the Henley Management College in the United Kingdom and is a gradu-ate of the Public Executive Program at the University of Michigan in the US.
He has over 20 years professional and manage-ment experience in Barbados, the United Kingdom, Guyana, Brazil and Puerto Rico as well as several other Caribbean islands. His experience includes professional advice and executive management in the areas of finan-cial control, corporate services and real estate development.
Mr. de Caires has played a pivotal role in a number of organizations and has been a leader in many major project initiatives, including: total quality management implementation; corporate information systems development and creation of the corporate and consulting division for an international professional firm. He is Chairman of the Barbados Private Sector Association, the Barbados Tourism Invest-ment Inc. and World Cup Barbados Inc. He is past president of the Institute of Chartered Accountants of Barbados and was one of the founding faculty members of the executive MBA program of the University of the West Indies. He serves as a director on several local and offshore companies.
Mr. Terry Hanton, FCA
Managing DirectorProperty Consultancy Services Inc.
Mr. Terry Hanton is a UK trained Chartered Accountant specialising in consultancy ser-vices in the real estate and hospitality sectors. From 1984 to 1996 he was Finance Director of St. James Beach Hotels Plc, a Barbados based hotel group which was traded on London and Barbados stock exchanges. Since 1998 he has been the Managing Director of Prop-erty Consultancy Services Inc., a subsidiary of Altman Real Estate.
From 1998 he has project managed the Sugar Hill resort community in Barbados.
8 Fortress Caribbean Property Fund Limited | Information Memorandum
CONTENTS cont’d
4. LETTER FROM THE CHAIRMAN
To: The Class “A” shareholders of Fortress Caribbean Property Fund Limited
Dear Shareholder,
Re: 2 for 3 Class “A” Rights Issue at $1.40 per share
At a meeting of the Board of Directors of Fortress Caribbean Property Fund Limited (“the Fund”) held on June 1st, 2005, it was resolved to issue and offer for sale a Rights Issue of two (2) new Class “A” shares for every three (3) Class “A” shares held at the close of business on September 30th, 2005, with the purpose of raising approximately $30.8 million, net of expenses.
The Rights Issue will not be underwritten. However, initial commitments have been received from a number of investors, who have agreed to purchase Shares up to a maximum of $18 million in the event that shareholders do not take up their Rights and Excess Shares. The lead stockbroker to the Issue is Signia Financial Group Inc.
Reason for the IssueThe Fund is a closed end fund which is fully invested. There are a number of attractive investment opportunities presently before the Fund, and in addition the Fund is increasingly being invited to partici-pate in investment projects (see details of individual projects in Section 6). In order to capitalize on these opportunities, the Fund requires additional capital. Below is a list of projects that have been approved in principle by your Board of Directors which are considered attractive investment opportunities:
Capital Required
Project $million
The CS&C joint venture - Barbados $6.0
Cap Estate residential development – St. Lucia $10.0
Lime Grove residential/commercial development – Barbados $2.0
Rockley Resort residential development - Barbados $3.0
Development of Holder’s Polo Manor - Barbados $4.0
Development of Lot #102 Tobago Plantation - Tobago $1.0
Surplus for funding of future projects $4.8
TOTAL $30.8
Letter from The ChairmanEach of the above projects has been subjected to financial analysis including the evaluation of an appropriate capital structure. Based on this, the above levels of capital are considered prudent with respect to each of the projects.
The above proposed equity investments will further diversify the Fund and enhance the prospects for both short and long term returns to shareholders.
Risk FactorsThe Fund will be subject to many risk factors which may impact on its future performance. Shareholders should consider the risk factors set out in Section 7 and the other information in this document before subscribing for New Shares under the Rights Issue.
Action to be takenA provisional allotment letter in respect of your entitlement to Fund Shares is enclosed. This contains details regarding the procedure for acceptance and payment, and for renunciation of your rights should you wish to sell all or part of your entitlement.
Directors’ IntentionsThe Directors intend to take up all of their entitlements to Fund Shares under this Rights Issue.
We look forward to your participation in this Rights Issue.
Yours sincerely,Fortress Caribbean Property Fund Limited,
______________________________
Mr. Geoffrey Cave – ChairmanOctober 3rd, 2005
Fortress Caribbean Property Fund Limited | Information Memorandum 9
5. DETAILS OF THE OFFER
5.1. TERMS OF THE RIGHTS ISSUE
The Fund is raising $30.8 million, net
of expenses, through a Rights Issue of
22,326,840 new Fund Shares at $1.40 per
share. The New Shares are being offered by
way of a rights issue to existing shareholders
on the following terms as set out below:
• Two (2) new shares (New Shares) for
each three (3) shares held on
September 30th, 2005
• Each New Share to be issued at a
price of $1.40
• The New Shares will be issued
ex-dividend
• Fractional entitlements will not be
allowed, and entitlements to New
Shares will be rounded up or down
to the nearest whole number as the
case may be
• The New Shares will be issued and
fully paid and will rank pari-passu in
all respects with the existing issued
shares
Following the closure of the Rights Issue,
applications will be made to the Barbados
Stock Exchange and The Trinidad and Tobago
Stock Exchange for the New Shares to be listed.
Subject to this listing being granted, dealing in
the New Shares is expected to commence on
November 8th, 2005.
5.2. ACTION TO BE TAKEN -
Procedure for Acceptance and Payment
The Provisional Allotment Letter in respect of
the New Shares is provided on page 41 of this
document, and indicates the holding of shares
on which your entitlement has been based, as
well as the aggregate number of New Shares
which you have been provisionally allotted.
If you wish to take up your entitlement,
whether in whole or in part, you must return
the Provisional Allotment Letter and the Form
of Acceptance, together with a remittance for
the amount payable on acceptance, in accor-
dance with the instructions printed thereon,
to Fortress Fund Managers Limited or Signia
Financial Group Inc., so as to arrive no later
than 5:00pm on Friday October 28th,
2005.
All subscription payments must be in Barba-
dos dollars and cheques or banker’s drafts
should be made payable to “FCPF Rights
Issue”. Cheques and banker’s drafts will be
presented for payment upon receipt. The
Directors reserve the right to make presenta-
tion of cheques to allow the Fund to obtain
value for remittances at the earliest opportu-
nity. It is a condition of the Rights Issue that
cheques shall be honoured at the first presen-
tation and the Fund may elect not to treat as
valid acceptances in respect of which cheques
are not so honoured.
It is the responsibility of each subscriber for
New Shares to seek taxation, legal or other
professional advice if necessary, and to comply
with any exchange control or other legal
requirements relating to their subscription or
application.
All enquiries in relation to the Provisional Allot-
ment Letter should be addressed to Fortress
Fund Managers Limited, 1st Floor Carlisle
House, Hincks Street, Bridgetown, Barbados.
5.3. ACTION TO BE TAKEN - Procedure
for Sale or Renunciation of New Shares
Entitlement
Dealings in rights to subscribe for the
New Shares - Dealings on the Barbados Stock
Exchange in the rights to subscribe for the New
Shares are expected to take place on October
11th, 12th, 14th, 18th, 19th, and 21st. Persons
wishing to dispose of all or part of their entitle-
ment should follow the instructions contained
in the Provisional Allotment Letter.
Renunciation - A shareholder who does
not wish to accept all of his or her allot-
ment will be deemed to have renounced the
portion which they do NOT wish to accept by
simply not accepting his or her entitlement
as evidenced on the Provisional Allotment
Letter. Shareholders who do not wish their
entire allotment may sell the portion which
they do not wish to accept by completing and
signing the Instruction to Sell Rights [Form of
Renunciation], Form B, which is provided for
their convenience on page 45 of this document
and by delivering this form together with the
Provisional Allotment Letter to their stock-
broker by 9:00 am on Friday October 21st,
2005.
Details of The Offer
10 Fortress Caribbean Property Fund Limited | Information Memorandum
5.4. PROCEDURE FOR RIGHTS NOT TAKEN
UP – “EXCESS SHARES”
If payment in full for an entitlement to New
Shares in not received by 5:00 pm on October
28th, 2005, in accordance with the procedure
specified for acceptance and payment, then
the provisional allotment will be deemed to
have been declined and will lapse. In addition,
if you do not accept the shares provisionally
allotted to you, either in whole or in part, and
do not renounce your entitlement thereto on
or before 5:00 pm on October 28th, 2005 the
offer will be considered as not having been
accepted and will lapse. The shares related to
this offer will thereupon be treated as Excess
Shares as outlined below.
New Shares not taken up will be designated
“Excess Shares”.
Shareholders who would like to apply for
Excess Shares may do so by completing the
Application for Excess Shares (Form C), which
is provided on page 47 of this Information
Memorandum, and forwarding this directly to
Fortress Fund Managers Limited or Signia Finan-
cial Group Inc.. Excess Shares will be issued first
to individual shareholders whose rights were
for less than 7,143 New Shares (approximately
$10,000) in order to bring the value of their
holding of New Shares up to $10,000. There-
after, any remaining Excess Shares will be allot-
ted as determined by the Board of Directors of
the Fund. Payment for Excess Shares should be
made by a separate cheque or bank draft and
made payable to “FCPF Rights Issue” to reach
Fortress Fund Managers Limited or Signia
Financial Group Inc. not later than 5:00 pm
on Friday, October 28th, 2005.
If subscribers cannot be procured on the basis
described above, the relevant New Shares will
be subscribed for by the parties from whom
initial commitments have been received at the
Rights Issue price of $1.40 per share in accor-
dance with the basis described in Section 5.5 of
this Information Memorandum.
5.5. COMMITTED PARTIES OR THEIR
NOMINEES
The Rights Issue is not being underwritten.
However, initial commitments have been
received in writing from a number of local and
foreign investors.
In the event that not all shareholders take up
their Rights and Excess Shares, the Committed
Parties or their nominees have agreed to
purchase such shares at the Offer Price up to a
maximum of $18 million.
5.6. CONFIRMATION OF ALLOTMENTS AND
OVER SUBSCRIPTION REFUNDS
Confirmation of allotments of New Shares
together with any cheques in respect of over
subscriptions for Excess Shares are expected to
be dispatched by post by November 4th, 2005.
Ownership of shares will be in non-certified
form and the record of title of ownership will be
maintained in electronic form by the company
secretary and the Barbados Central Securities
Depository. Therefore, it is not the intention to
issue share certificates to shareholders.
5.7. POSTING
All documents and cheques posted to or by the
person entitled thereto (or their agents) will be
posted at their risk.
5.8. LEAD STOCK BROKER AND MANAGER
CONTACT INFORMATION
Lead Stockbroker:
Signia Financial Group Inc.
1st Floor Carlisle House,
Hincks Street,
Bridgetown,
Barbados W.I.
Tel: (246) 429 7344
For information on other brokers please visit
our website at www.fortressfund.com
Manager To The Issue:
Fortress Fund Managers Limited
1st Floor Carlisle House,
Hincks Street,
Bridgetown,
Barbados W.I.
Tel (246) 431 2198
Details of The Offer cont’d
Fortress Caribbean Property Fund Limited | Information Memorandum 11
PROSPECTSCave Shepherd
6. PROSPECTS6.1. NEW INVESTMENT OPPORTUNITIES
6.1.1. THE CS&C JOINT VENTURE, BARBADOSThe Fund will take a 20% interest in a real estate partnership (The CS&C Joint Venture) which will acquire land and buildings at seven locations in Barbados presently owned by Cave Shepherd & Co. Limited (“Cave Shepherd”) and Carter Holdings Limited (“Carter’s” – which owns the real estate occupied by Carter & Co. Ltd.). The properties include approximately 24 acres of land and 250,000 square feet of retail, office and warehouse space, and represent a diversified portfolio of real estate. The five developed sites, which include commercial buildings, will be acquired and leased back to the vendors, or their affiliates, for terms of 7 to 15 years.In summary, the properties to be purchased, and related purchase prices, are as follows:
Property purchases: $ 000’sCave Shepherd building – Broad Street $37,700Carter’s buildings (4) $20,600 Carter’s – undeveloped land $6,309 Transaction costs - estimated $1,141
$ 65,750
The Cave Shepherd building is the main Cave Shepherd retail centre on Broad Street, Bridgetown.
Carter’s properties consist of the following:
• Carter’s main retail complex in Wildey, St. Michael• Carter’s retail store and head office building in Barbarees Hill• Carter’s store on High Street, Bridgetown• Warehouse complex in Lower Estate, St. George• 3.5 acres of undeveloped land at Lower Estate adjoining the Lower Estate warehouse complex• 13.5 acres of undeveloped land at Lower Estate
The CS&C JV will finance the purchase of these properties as follows:
Finance structure – $000’s Equity Debt TotalDeveloped buildings $23,500 $35,750 $59,250 Undeveloped land 6,500 - 6,500 TOTAL $30,000 $35,750 $65,750
Debt and Equity % 45% 55% 100%
The cost to the Fund of a 20% interest in this partnership is $6.0 million. It is projected that the leveraged internal rate of return on equity investment in the venture, over the first 10 years, will be approximately 13.7% for the developed sites, with potential also for significant returns on development of the undeveloped lands. The debt assumes a 12-year fixed rate loan at an effective interest rate of 6.75% per annum.
Carters
Fortress Caribbean Property Fund Limited | Information Memorandum 11
12 Fortress Caribbean Property Fund Limited | Information Memorandum
PROSPECTS6.1.2. CAP ESTATE RESIDENTIAL
DEVELOPMENT, ST. LUCIA
The Fund has entered into an agreement to
acquire land at Cap Estate, St. Lucia for $5.2
million, with the objective of developing a golf
course residential complex. The site, known
as “Villas on the Green” is 16.86 acres of land
adjoining the 7th and 8th holes of the Cap
Estate golf course. It is presently undeveloped
but has the potential to house 60 residential
units. There will be a mixture of high density
townhouses and some single family homes on
the lots.
The St. Lucia government has created a very
attractive package of concessions designed
around the Cricket World Cup in 2007. The
focus is to add room capacity quickly. Hence,
this project is very timely. A summary of the
projected costs, financial structure and returns
is provided below:
CAP ESTATE RESIDENTIAL GOLF DEVELOPMENT $ 000’s
TOTAL PROJECTED CAPITAL COSTS (excluding financing) $47,478
CAPITAL STRUCTURE:
- Equity $10,000
- Debt $ 7,200
$17,200
- Funding from internal cash flow (net sales proceeds) $30,278
$47,478
Projected Internal rate of return - leveraged 40%
St. Lucia has undergone a major resurgence in
vacation home investment and interest. This
can be seen in projects such as Discovery at
Marigot Bay and Plantation Beach, both of
which have sold extremely well. New projects
include two residential marinas. The missing
ingredient is golf residential, which has done
well in other parts of the region.
Phase I will include 20 two and three bedroom
townhouses estimated to cost $12 million.
These units are projected to realize gross
revenue of approximately $20.5 million. An
additional 55 units are proposed in subse-
quent phases to be financed out of the excess
cash flow from Phase 1.
Cap Estate
12 Fortress Caribbean Property Fund Limited | Information Memorandum
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PROSPECTS
6.1.3. LIME GROVE RESIDENTIAL AND COMMERCIAL DEVELOPMENT, BARBADOS
The Fund has taken a 20% interest, at a cost of $2.0 million, in a venture involving the purchase
of 435,000 square feet of land in the centre of Holetown, St James, Barbados. The project in-
volves the development of a residential and commercial complex in the form of a mini-village
with a shopping centre, homes and recreational areas. The site, known as Lime Grove, is present-
ly undeveloped but has received planning permission for a 54 townhouse residential community
and a commercial complex including retail shops, offices, a sports bar and a bank.
Below is summary of the projected costs, financial structure and returns:
LIME GROVE DEVELOPMENT $000’s
TOTAL PROJECTED CAPITAL COSTS (excluding financing) $37,934
CAPITAL STRUCTURE:
- Equity $10,000
- Debt – 6 year loan $12,000
$22,000
- Funding from internal cash flow (net sales proceeds) $15,934
$37,934
Projected Internal rate of return - leveraged 25%
It is planned that Phase I of the venture will
involve construction of all of the retail and
commercial facilities. Two townhouse show
units will also be constructed during this
phase and a sales office will be opened in one
of the retail spaces. Phase II anticipates the
development of the residential units in parcels,
with these being released to the market
through the sales office in order to ensure a
well planned development with minimum
cash requirements.
Holetown is a thriving residential, retail and
recreational centre. This site is one of the most
prestigious locations available in the area.
Lime Grove
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14 Fortress Caribbean Property Fund Limited | Information Memorandum
PROSPECTS
A summary of the projected capital costs, financial structure and returns is provided below:
Rockley Resort
6.1.4. ROCKLEY RESORT RESIDENTIAL
DEVELOPMENT, BARBADOS
The Fund, in partnership with Dowding
Estates & Trading Company (DETCO), is in the
process of acquiring the real estate holdings of
Rockley Recreations Ltd. in receivership which
consists of 60 one-bedroom accommodation
units, known as Orange Hill, overlooking the
golf course, 5 tennis courts and 2 squash
courts. The Fund will hold a 50% interest in
the venture. The parties plan to develop the
property as follows:
• Renovate the 60 units at Orange Hill and
convert them into one and two bed
room condominium units
• Demolish the central facility and build 30
condominiums of approximately
1,000 sq ft each
• Sell all units as freehold property
• Sell the tennis courts to DETCO who own
the golf course and clubhouse.
It is assumed that the development will be conducted in phases. Phase I will involve the conversion
of the 60 existing studio units. Phase II anticipates the construction of 30 new condominiums on
the site currently occupied by the central facilities of the former Rockley Resort Hotel.
ROCKLEY CONDOMINIUM COMPLEX $ 000’s
TOTAL PROJECTED CAPITAL COSTS (excluding financing) $18,245
CAPITAL STRUCTURE:
- Equity $6,000
- Debt - 2 year loan $4,000
$10,000
- Funding from internal cash flow (net sales proceeds) $8,245
$18,245
Projected Internal rate of return - leveraged 18%
14 Fortress Caribbean Property Fund Limited | Information Memorandum
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PROSPECTS
6.1.5. HOLDERS POLO MANOR
DEVELOPMENT, BARBADOS
This is a 3 1/2 acre site with expansive views
over Holder’s Polo Field, the Sandy Lane Green
Monkey Golf Course and the sea. Plans have
been prepared for a six bedroom house to be
built and sold and an application has been
submitted for Town Planning permission of
this development.
The Fund is expected to realize a significant
profit from this property, either from sale of
the undeveloped land or on the sale of the
house if this is constructed.
Holders Tobago Plantation
6.1.6. TOBAGO PLANTATION
DEVELOPMENT, TOBAGO
The Fund intends to construct a 3 bedroom
house on Lot 102 for resale or rental. The
construction cost of the house is expected to
be approximately $1 million and it is proposed
that the property be offered for resale.
Fortress Caribbean Property Fund Limited | Information Memorandum 15
16 Fortress Caribbean Property Fund Limited | Information Memorandum
Asset Distribution By Sector
Presently the Fund is primarily invested in commercial office buildings (with some retail space)
which are low yield and low risk. Increased investment in residential projects, which target the
overseas second home buyer, is expected to bring higher returns to the fund in the medium term
which is reflective of the increased risk inherent in such investments. The new capital will be
used to fund a number of residential developments as described earlier. The CS&C project will
increase the Fund’s investment in retail real estate.
Asset Distribution By Location
The Fund’s main assets are in Barbados (presently 93% of assets), with small investments in
Tobago and Canada. The Fund intends to invest an additional $1 million in Tobago as well as $10
million in Cap Estate, St. Lucia. This will diversify the portfolio geographically.
6.2. IMPACT OF THE NEW INVESTMENTS
ON THE FUND’S PORTFOLIO
The fund is diversifying its assets by the invest-
ment of a significant portion of the new capital
in undeveloped land which will be utilized in
residential real estate projects in Barbados and
other Caribbean islands.
Asset distribution by type
Presently the Fund’s major assets are four (4)
buildings which are all rented out under long or
short term leases. Additionally the Fund owns
land at Lower Estate, Holders and in Tobago,
which remain undeveloped, as well as newly
purchased properties, Canmore and Villas on
the Beach, which are available for resale.
The uses identified for the new capital include
a 20% investment in the CS&C Joint Venture
which will own an additional six (6) income
earning buildings as well as 17 acres of land
with future development potential. The
remainder of the funds will be allocated to
the purchase and development of lands at
Cap Estate in St. Lucia, Rockley Resort, Lime
Grove and Holder’s in Barbados and Tobago
Plantation golf development in Tobago. The
Fund and its partners intend to develop all
these sites for sale in the future.
Fortress Caribbean Property Fund Limited | Information Memorandum 17
6.3. CARIBBEAN REAL ESTATE OUTLOOK
The Caribbean is on the crest of a wave of
real estate development and is attracting
significant interest from major interna-
tional players who before now, considered
the region too risky. While the outlook is
different on a sectoral and territorial basis,
in general the residential development boom
spans the whole region. In previous years,
high-end residential expansion was limited to
the Bahamas, Barbados, the Cayman Islands,
Puerto Rico and the Dominican Republic.
Nevertheless, in the last two years almost every
island has experienced a surge of new develop-
ments and several islands that had experi-
enced a slowdown such as St. Lucia, Grenada,
Tobago and Antigua are now experiencing a
resurgence. We are particularly excited about
St. Lucia because the infrastructure is strong,
the building industry is well developed and the
airlift for potential non-national purchasers is
very good. However, we are less enthusiastic
about Tobago because of its weak airlift.
The North American vacation home market is
in an unprecedented boom and it has begun
to have a significant economic impact on such
islands as the Turks & Caicos, Anguilla and St.
Barts which, although small, are within easy
reach of North America.
To a great extent the commercial sector within
the Caribbean remains static with the notice-
able exception of Trinidad and Puerto Rico.
The growth of the office sector driven by
the offshore financial services boom of the
Caribbean Real Estate Outlook/Risk Factors
late 80’s and early 90’s has dried up and as a
result many islands are experiencing reduced
office construction. However, high-end
retail development is occurring in many of
the islands and new airport or seaport retail
centres are in construction.
Industrial and warehouse booms are really
only taking place in islands undergoing
major industrial growth for example, Trinidad
and Puerto Rico. Finally, the hotel sector is
showing signs of growth in capacity and it is
notable that there is for the first time in many
years signs of equity investment by the chain
hotels.
Thus, the outlook for the Caribbean appears
attractive with a particular emphasis on
high-end residential communities, and the
expectation of increased profits for the region
as a result of the Cricket World Cup in 2007
is significant.
7. RISK FACTORS
Risk Factors of Real Estate Investments
The higher returns generally associated with
real estate are due to inherent risks in the
investment itself. The primary risk is that
of reduced liquidity due to the size of the
transactions where a transaction can take
several months or even years to be executed.
The market in which real estate assets trade
is not well established and defined, there are
often few participants and limited informa-
tion. In addition, the valuation of properties
is often subjective where appraisals are based
on several assumptions including estimates
of replacement costs, similar market values,
future rental incomes and costs and future
interest rates.
The mitigating factor for the above risks is
time. Performance and returns from real estate
investments are typically realized over long
periods of time and hence this asset class is
most suitable to long-term investors.
Investment in real estate properties in the
Caribbean is also exposed generally to the risk
of natural disasters, most notably hurricanes.
To mitigate against such risk the Fund seeks
to diversify its portfolio geographically and to
ensure that appropriate insurance is in place.
Although at present the Fund is primarily
invested in Barbados properties, the new invest-
ment proposals will improve the diversification
of the portfolio as noted in Section 6.2..
18 Fortress Caribbean Property Fund Limited | Information Memorandum
Purchase And Leaseback
The Fund engages in the purchase and
leaseback of properties. In such transactions,
the Fund is exposed mainly to tenancy risk and
interest rate risk.
Tenancy risk relates to risk that the tenant to
whom the property is rented fails to pay future
lease payments primarily because they may
not be able to afford these. This may be due
to factors such as a deterioration in economic
conditions, increased competition, out-dated
product lines or mismanagement. The Fund’s
sale and leaseback transactions are limited to
what it considers high quality tenants, and to
properties in attractive locations with good
prospects for alternative rental.
Since sale and leaseback transactions are
typically levered by debt financing, these are
also exposed to increases in interest rates
which increase debt service costs. The Fund
manages this risk by securing fixed interest
rate financing wherever this is considered
financially feasible.
Construction and development properties
The Fund has invested in a number of properties
which it proposes to develop and then either
sell or lease. The major risks involved in such
properties are that development costs may be
significantly more than budgeted, the sale or
rental of units are not realized in the timeframe
or at the prices and rates forecasted, and
that relevant foreign exchange rates change
substantially affecting either construction
costs or sales or both.
The Fund uses experienced property managers
to manage the development of these projects
and attempts to develop these properties
when market conditions appear favourable.
However, sales and foreign exchange risks are
otherwise difficult to mitigate against and are
inherent in this type of investment which is the
reason that high margins and returns are built
into such investment.
Rental Properties
The Fund invests in properties which it rents
to third party tenants, typically for periods of
between three to ten years. Such investments
are primarily exposed to tenancy risk,
deteriorating economic conditions and interest
rate risk.
The Fund seeks to manage such risks by
identifying quality tenants, diversifying its
tenant base by industry, and obtaining fixed
interest rate financing.
Share Price
The Fund’s shares trade on the Barbados
Stock Exchange (BSE) and approval has
recently been granted to list on the TTSE.
The BSE and the TTSE are emerging stock
markets and may have greater levels of risk
and volatility than more established markets.
The average transaction sizes are small and
the market is typically less liquid than larger
more established markets.
Currency fluctuations, exchange controls, tax
and other regulations currently applicable or
which may be introduced in the future may
affect the value and marketability of the Fund’s
investments and income derived therefrom.
Financial supervision and regulation is currently
at a less developed stage in the Caribbean
than other more developed capital markets.
The price at which shares trade may be higher
or lower, than the subscription price.
The capital and appraised values of the
investments held can go down as well as
up, as interest rates and other economic
conditions change. This will be reflected in the
quoted share price of the Fund’s shares which
may fluctuate up or down as a result.
Forward-looking statements in this Information
Memorandum are not guarantees of the Fund’s
future performance.
This Information Memorandum makes
reference to actual rates of return experienced
by the Fund’s investments, as well as forecast-
ed returns on future proposed investments.
There can be no guarantee that such rates
of return will continue, or be realized in the
future. Accordingly, the performance of the
Fund is not ensured nor is the performance
guaranteed by the Fund, its Manager or any
other authority. Investments made in the Fund
are at the sole risk of the investor.
Risk Factors cont’d
Fortress Caribbean Property Fund Limited | Information Memorandum 19
CARLISLE HOUSE Location - Bridgetown, Barbados Cost - $8.6 million (1999) Tenantable space - 45,056 sq ft
Carlisle House is a commercial building in
Bridgetown offering retail and office space. The
property has been significantly renovated and
upgraded since acquisition by the Fund and the
independent valuers have valued the property
at $9.5 million as of March 31st, 2005.
A pedestrian plaza was completed in June
2005. The cost of the works is approximately
$1.2 million. This has beautified the prop-
erty and already resulted in a number of new
tenancies. This building has a replacement
cost of $16 million and the Directors are of the
view that this property offers great potential
for a capital uplift when fully tenanted.
NO 24 BROAD STREET Location – Bridgetown, Barbados Cost - $5.5 million (1999) Tenantable space – 12,000 sq ft
No 24 Broad Street is an office and retail
building located in the heart of Bridgetown.
During 2004 a new five year net lease was
signed with Duty Free Caribbean, who sub-
lets the ground floor to Colombian Emeralds
International. The lease payments are incre-
mented at 3% per annum.
The property was valued at $6,950,000 as at
March 31st, 2005.
8. FINANCIAL HISTORY
8.1. CURRENT REAL ESTATE PORTFOLIO
THE CWBET BUILDING JOINT VENTURE Location - St. Michael, Barbados Cost - $28.1 million (2001) Tenantable space - 84,838 sq ft
The Fund set up a partnership in 2001 to buy
this building. The Partners are:
Fortress Caribbean Property Fund 57%
National Insurance Board 33%
Sagicor 10%
The building is leased back to Cable & Wireless
on a triple net fifteen (15) year lease with rents
incrementing at 5% per annum. The return
on the investment in fiscal 2004 was 27%.
The property was valued at $34.7 million as at
March 31st, 2005.
PORTFOLIO
Fortress Caribbean Property Fund Limited | Information Memorandum 19
20 Fortress Caribbean Property Fund Limited | Information Memorandum
LOWER ESTATE LAND Location – St. Michael, Barbados Cost - $ 732 thousand
This prime industrial 45,000 square foot site is
located close to Highway 2. The Directors do
not presently have plans to develop the site.
The property was valued for $750,000 at
March 31st, 2005.
LOT 102 TOBAGO PLANTATION Location – Tobago Cost - $644 thousand
This 27,000 square foot lot is located on the
third hole of the golf course on the Tobago
Plantation master- planned community. The
development totals 750 acres, including a
200 room Hilton Hotel and an eighteen-hole
golf course. When complete it will have 300
homes.
Lot 102 is one of the best sites on the devel-
opment and has been valued at $800,000 as
at March 31st, 2005.
As noted above, the development of this site
into a luxury detached home is one the invest-
ment opportunities currently being pursued
by the Fund.
CHATTEL VILLAGE Location: Holetown, Barbados Cost - $1.55 million (1999) Tenantable space - 8,000 sq ft
The Chattel Village consists of a number of
detached chattel houses which are rented
as retail units. The property is situated on a
prime site in Holetown which is leased until
2016, and the valuers have placed a value of
$1,620,000 on the property as at March 31st,
2005.
The property remains fully tenanted, and en-
joys a net rental yield of 11.3%.
PORTFOLIO
20 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 21
PORTFOLIO VILLAS ON THE BEACH - UNIT #305 Location - Holetown, Barbados Cost - $1.8 million (2004) Tenantable space - 1,600 sq ft
Villas On The Beach is an eighteen unit lux-
ury condominium complex. The Fund has
acquired a unit in this development which
was completed in April 2005. It is expected
that this unit will have significant resale po-
tential from as early as Winter 2006.
HOLDERS POLO MANOR Location - Holders Hill, St. James, Barbados Cost - $1.8 million (2002) Size - 158,000 sq ft
The 3 acre Holders site has been earmarked
for a 7,000 square foot house that will be built
and offered for sale. The development of this
site into a luxury home is one the investment
opportunities currently being pursued by the
Fund.
The land was valued at $2.2 million as at
March 31st, 2005.
CANMORE VILLAS - UNIT #5 Location - Canmore, Alberta, Canada Cost - Cad$762 thousand (2004) Tenantable space - 2,436 sq ft
The Fund has purchased a two-bedroom
condominium on the Three Sisters Golf Course in Canmore, Alberta Canada. Three Sisters is one of the last remaining develop-ment sites close to Banff National Park in the Canadian Rockies. The unit purchased sits behind one of the greens of the golf course. Since the investment took place the development has been endorsed by a leading Canadian property developer.
Fortress Caribbean Property Fund Limited | Information Memorandum 21
22 Fortress Caribbean Property Fund Limited | Information Memorandum
8.2. FUND PERFORMANCE
Fortress Caribbean Property Fund - Performance Summary
The Fortress Caribbean Property Fund was
launched in August 1999 at $1.00 per share.
The Fund raised $17.7 million in the initial
share issue. The original shareholders received
warrants for one share for each five shares
purchased which allowed the shareholder
to purchase new shares at $1.00 per share
at specific exercise dates up to October 1st,
2003.
In October 2001, the Fund issued an addition-
al 12.5 million shares at $1.20 per share which
raised an additional $15 million in new capital
for the Fund. As at June 30th 2005, the Fund
had shareholders’ funds of $42.4 million with
33,490,261 shares in issue, resulting in a net
asset value per share at June 30th 2005 of
$1.27. Since inception the Fund has paid a
total of $5.8 million in dividends or $0.05 per
share for each year from 2001 to 2004.
The Fund now has a diversified portfolio
of nine property investments and an asset
value of $66.1 million. The property portfolio
includes an attractive mix of commercial and
residential real estate inclusive of office and
retail in prime locations in Barbados, Tobago
and Canada. Most of the properties are fully
tenanted with medium to long-term leases to
Grade ‘A’ tenants. The portfolio also includes
two land sites and three residential units
targeted at the luxury vacation market, which
are at various stages of development. The
Fund has paid deposits and signed commit-
ments for three new opportunities in Barbados
and St. Lucia.
Fund Performance
vs. Share Price
Fortress Caribbean Property Fund Limited | Information Memorandum 23
Fund Performance from Inception to June
30th 2005
Inclusive of dividends and warrants, the
growth in the net assets of the Fund after all
fees and expenses, is equal to an internal rate
of return of 7.3% since inception. This perfor-
mance is well above the return which would
have been achieved from savings accounts but
is below the target return of the Fund. The
major contributor to the lower than expected
performance has been Carlisle House which is
the largest asset in the Fund and which has
had high vacancy rates, due in part to delays
in completing the plaza. The Fund has been
negatively affected by both the reduced
rental income from Carlisle House and also a
significant reduction in the appraised value of
the property which has impacted the net asset
value of the Fund.
At September 16th 2005, the Fund’s shares
were trading for $1.60 per share on the
BSE which represents a significant premium
over the net asset value (NAV) per share of
$1.27. As a result, the actual return earned
by shareholders who purchased shares in the
Fund at inception and exercised their warrants
is estimated to be 11.4% to September 16th
2005 as indicated below:
Performance of the Share Price - Inclusive Of Dividends & Warrants
Cash Flow per share
Internal Rate of return (IRR) on investment in Fund shares 1999 2000 2001 2002 2003 2004 2005
Purchase of five shares at $1.00 per share ($5.00)
Purchase price of 1 warrant for every five shares ($1.00)
Dividends received @ $0.05 per share $0.00 $0.25 $0.30 $0.30 $0.30
Market value of shares at September 16th 2005 @ $1.60 per share $9.60
Net cash flow for every five shares purchased at inception ($5.00) $0.00 ($0.75) $0.30 $0.30 $0.30 $9.60
Internal rate of Return (IRR) since inception 11.4%
Fund Performance cont’d
24 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 25
8.4. STATEMENTS OF INCOME: 2000 - 2004Fortress Caribbean Property Fund LimitedConsolidated Statement of Income - Audited For the years ended September 30th, 2000, 2001, 2002, 2003 and 2004 (expressed in Barbados dollars)
(Note 1) 2004 2003 2002 2001 2000 $000’s $000’s $000’s $000’s $000’sRevenue Net rental income $ 4,832 $ 4,561 $ 3,974 $ 1,217 $ 1,851 Fair value gains/(losses) 324 (1,356) 3,454 51 -Interest income - 16 543 186 117 Net gain (loss) on available-for-sale securities 611 446 198 (9) 119 Other income 51 125 21 10 - Dividend income 11 9 8 6 17
5,829 3,801 8,198 1,461 2,104 Expenses Interest expense 1,377 1,480 1,566 25 -Fund management fees 301 304 289 161 158Investment adviser fees 301 304 289 161 158Write off of deferred expenses - - - 156 39Audit, listing and other professional fees 126 107 95 85 64Directors’ fees 12 12 12 12 13Office and administrative expenses 46 55 22 12 81 2,163 2,262 2,273 612 513
Net income before minority interest 3,666 1,539 5,925 849 1,591Minority interest (978) (836) (3,301) - -
Net income for the year 2,688 703 2,624 849 1,591
Shareholder funds - beginning of year 38,495 38,975 21,288 21,426 -Issue of shares 929 445 16,669 - 17,700Surplus (deficit) on revaluation of investment properties - - - (102) 2,135Dividends (1,675) (1,628) (1,606) (885) -
Shareholder funds – end of year $ 40,437 $ 38,495 $ 38,975 $ 21,288 $ 21,426 Earnings per share - basic and diluted $ 0.08 $ 0.02 $ 0.08 $ 0.05 $ 0.09
Note 1 – for the period from May 7, 1999, the date of incorporation, to September 30, 2000
26 Fortress Caribbean Property Fund Limited | Information Memorandum
8.5. BALANCE SHEETS: 2000 – 2004Fortress Caribbean Property Fund LimitedConsolidated Balance Sheet - AuditedAs of September 30th, 2000, 2001, 2002, 2003 and 2004 (expressed in Barbados dollars)
2004 2003 2002 2001 2000 $000’s $000’s $000’s $000’s $000’sASSETS Investment properties $ 58,218 $ 56,155 $ 57,110 $ 21,010 $ 18,893Investment in available-for-sale securities 7,016 7,735 7,950 1,637 1,511Accounts receivable and prepaid expenses 114 79 359 205 299Cash and bank balances 1,006 2,162 2,177 2,267 996
Total assets 66,354 66,131 67,596 25,119 21,699 LIABILITIES Security deposits 158 137 127 115 121Accounts payable and accrued expenses 535 972 1,909 849 152Loan payable 14,750 16,100 17,250 400 -Proposed dividend 1,675 1,628 1,606 885 -Advance subscription for shares - 758 128 1,582 -
Total liabilities 17,118 19,595 21,020 3,831 273
Total assets less total liabilities $ 49,236 $ 46,536 $ 46,576 $ 21,288 $ 21,426 CAPITAL AND RESERVES Share capital $ 35,742 $ 34,814 $ 34,369 $ 17,700 $ 17,700Fair value reserve - - - 2,034 2,135Retained earnings 4,695 3,681 4,606 1,554 1,591
Total shareholders’ funds 40,437 38,495 38,975 21,288 21,426
MINORITY INTEREST 8,799 8,041 7,601 - - $ 49,236 $ 46,536 $ 46,576 $ 21,288 $ 21,426 Net asset value per share $ 1.21 $ 1.18 $ 1.21 $ 1.20 $ 1.21
Fortress Caribbean Property Fund Limited | Information Memorandum 27
8.6. STATEMENTS OF CASH FLOWS: 2000 - 2004Fortress Caribbean Property Fund LimitedStatement of Consolidated Cash Flows - Audited For the years ended September 30th, 2000, 2001, 2002, 2003 and 2004 (expressed in Barbados dollars)
(Note 1) 2004 2003 2002 2001 2000 $000’s $000’s $000’s $000’s $000’sCash flows from operating activities Net income before minority interest $ 3,666 $ 1,539 $ 5,925 $ 849 $ 1,591Adjustment for: Interest income - (16) (543) (186) (117) Dividend income (11) (9) (8) (6) (17) Amortisation of premium on fixed income security - - 7 5 - Write off of deferred expenses - - - 156 38 Gain on sale of investment property - - (51) - Fair value (gains) losses (324) 1,356 (3,454) - - Net (gain) loss on available-for-sale securities (611) (446) (198) 9 (119)Operating profit before working capital changes 2,720 2,424 1,729 776 1,376Net (increase) decrease in accounts receivable and prepaid expenses (35) 280 (208) (23) (150)Net increase in deferred expenses - - - (7) (187)Net increase (decrease) in accounts payable and accrued liabilities (438) (936) 1,060 698 152Net increase in security deposits 21 9 12 (6) 121Cash generated from operations 2,268 1,777 2,593 1,438 1,312Interest received - 16 598 153 117Dividend received 11 9 8 5 17Net cash generated from operating activities 2,279 1,802 3,199 1,596 1,446 Cash flow from investing activities Purchase / additions to investment properties (1,739) (401) (32,645) (2,731) (16,757)Proceeds on sale of investment properties - - - 563 -Purchase of available-for-sale securities (32) (690) (25,198) (150) (1,977)Proceeds on sale of available-for-sale securities 1,362 1,351 19,075 11 584Net cash (used in) from investing activities (409) 260 (38,768) (2,307) (18,150) Cash flow from financing activities Issue of shares 929 444 16,669 - 17,700(Decrease) increase in advance subscriptions for shares (758) 630 (1,455) 1,582 -Minority investment in subsidiary - - 4,300 - -Distributions to minority investors (219) (395) - - -Dividends paid (1,628) (1,606) (885) - -Proceeds from loan - - 21,500 400 -Repayment of loans (1,350) (1,150) (4,650) - -Net cash (used in) from financing activities (3,026) (2,077) 35,479 1,982 17,700Net increase (decrease) in cash and cash equivalents (1,156) (15) (90) 1,271 996Cash and cash equivalents at beginning of year 2,162 2,177 2,267 996 -Cash and cash equivalents at end of year $ 1,006 $ 2,162 $ 2,177 $ 2,267 $ 996
Note 1 – for the period from May 7, 1999, the date of incorporation, to September 30th, 2000
28 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 29
8.8. STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 2005 - UNAUDITEDFortress Caribbean Property Fund LimitedConsolidated Statement of Income For the nine months ended June 30th, 2005 (expressed in Barbados dollars)
June 30 June 30 2005 2004Unaudited $000’s $000’s
Revenue Net rental income $ 3,728 $ 3,610Net gain on available-for-sale securities 469 512Other income 35 42
4,232 4,164 Expenses Interest expense 927 1,042Fund management fees 220 220Investment adviser fees 220 220Audit, listing and other professional fees 110 91Directors’ fees 9 9Office and administrative expenses 38 44
1,524 1,626
Net income before minority interest 2,708 2,538Minority interest (734) (630)
Net income for the period 1,974 1,908
Issue of shares - 929
Shareholder Funds – beginning of period 40,437 38,495
Shareholder Funds – end of period $ 42,411 $ 41,332 Earnings per share - basic and diluted $ 0.06 $ 0.06
You are in good hands.
30 Fortress Caribbean Property Fund Limited | Information Memorandum
8.9. BALANCE SHEET AS AT JUNE 30, 2005 - UNAUDITEDFortress Caribbean Property Fund LimitedConsolidated Balance SheetAs of June 30, 2005 (expressed in Barbados dollars)
June 30 June 30 2005 2004Unaudited $000’s $000’s
ASSETS
Investment properties $ 61,369 $ 57,084
Investment in available-for-sale securities 3,085 7,027
Accounts receivable and prepaid expenses 294 226
Cash and bank balances 1,316 1,420
Total assets 66,064 65,757
LIABILITIES
Accounts payable and accrued expenses 2,613 2,359
Loan payable 11,700 13,550
Total liabilities 14,313 15,909
Total assets less total liabilities $ 51,751 $ 49,848
CAPITAL AND RESERVES
Share capital $ 35,742 $ 35,742
Retained earnings 6,669 5,590
Total shareholders’ funds 42,411 41,332
MINORITY INTEREST 9,340 8,516
$ 51,751 $ 49,848
Net asset value per share $ 1.27 $ 1.23
Fortress Caribbean Property Fund Limited | Information Memorandum 31
8.10. STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 2005 - UNAUDITEDFortress Caribbean Property Fund LimitedStatement of Consolidated Cash Flows For the nine months ended June 30, 2005 (expressed in Barbados dollars)
June 30 June 30 2005 2004Unaudited $000’s $000’s
Cash flows from operating activities
Net income before minority interest $ 2,708 $ 2,538
Adjustment for:
Gain on sale of investment property (469) (512)
Operating profit before working capital changes 2,239 2,026
Net (increase) decrease in accounts receivable and prepaid expenses (180) (146)
Net increase (decrease) in accounts payable and accrued liabilities 70 (300)
Net cash generated from operating activities 2,129 1,580
Cash flow from investing activities
Purchase / additions to investment properties (3,150) (929)
Proceeds on sale of available-for-sale securities 4,400 1,219
Net cash (used in) from investing activities 1,250 290
Cash flow from financing activities
Issue of shares - 929
(Decrease) increase in advance subscriptions for shares - (758)
Distributions to minority investors (194) (155)
Dividends paid (1,675) (1,628)
Repayment of loans (1,200) (1,000)
Net cash (used in) from financing activities (3,069) (2,612)
Net increase (decrease) in cash and cash equivalents 310 (742)
Cash and cash equivalents at beginning of period 1,006 2,162
Cash and cash equivalents at end of period $ 1,316 $ 1,420
32 Fortress Caribbean Property Fund Limited | Information Memorandum
9. FUND HISTORY AND PROFILE
9.1. FORTRESS CARIBBEAN PROPERTY
FUND LIMITED
9.1.1. Type of Fund
The Fund is a Barbados based closed-end
mutual fund company which provides an
avenue for portfolio investment in real estate
properties and other securities primarily in
the Caribbean.
A closed-end Mutual Fund is an investment
company that issues a fixed number of shares
which it does not generally redeem (buy back)
on an ongoing basis. Shares of closed-end
Mutual Funds are traded in securities markets
through brokers at prices determined by
supply and demand. As a result the share price
can differ from the Net Asset Value (NAV).
The Fund’s shares are listed on the Barbados
Stock Exchange and commenced trading
in October 1999. The purchase and sale of
Shares can be made through any brokers
who are registered with the Barbados Stock
Exchange. Approval has recently been granted
to cross list the Fund’s shares on the TTSE.
9.1.2. The Fund Objective
The objective of the Fund is to achieve
long-term total return through a diversified
portfolio of real estate, shares in other
property companies or funds and Government
Securities predominantly in the Caribbean. The
return will be made up of capital appreciation
of the underlying assets plus rental income,
dividends and interest.
9.1.3. Fund Manager
The Manager of the Fund is Fortress Fund
Managers Limited (“FFM”), a Barbados based
investment management company which
has successfully launched and manages the
following mutual funds:
• Fortress Caribbean Growth Fund
• Fortress Caribbean Property Fund Limited
• Fortress Caribbean High Interest Fund
Limited
• Fortress Caribbean Pension Fund Limited
Total funds under management now exceed
$290 million. FFM is a licensed Fund
administrator under the Mutual Funds Act
of Barbados. The company is backed by a
number of leading companies with solid
reputations, and a wealth of experience in
business in the Caribbean and internationally.
The shareholders include Barbados Shipping
& Trading Co. Ltd., Cave Shepherd & Co.
Limited and The Nation Corporation.
Roger Cave is the Investment Manager and a
Director of FFM, being one of the founding
shareholders and holds the designation of
Chartered Financial Analyst (CFA). The CFA
is a program sponsored by the CFA Institute
in the U.S.A. Before joining Fortress, Mr. Cave
gained four years of professional accounting
experience with Coopers & Lybrand in Toronto
and Price Waterhouse in Barbados and he
has also worked with the Commonwealth
Development Corporation and Cave Shepherd.
He is a Director of the Barbados Stock
Exchange.
9.1.4. Investment Adviser
The Investment Adviser is AA Altman Real
Estate (Altman Real Estate), a Barbados based
Real Estate and Property Management firm
with over 20 years experience in real estate
sales, rentals and management.
Altman Real Estate has specialised in conceptu-
alising major residential developments
such Royal Westmoreland and Sugar Hill
in Barbados. Their subsidiary company,
Property Consultancy Services Inc., carries
out investment analysis, feasibility studies,
business valuations and business plans based
on widely accepted investment models. Their
recommendation on an investment is only
given after careful consideration of financial
returns, market research, project risk and an
assessment of the competency of the project’s
sponsors.
9.1.5. Property Manager
The property manager is Property Consultancy
Services Inc.. In addition to the services
mentioned above, the company offers project
management services as well as commercial
and residential asset management. The
company’s employees’ disciplines include
quantity surveying, project management and
property management along with a full range
of accounting and financial services.
The services provided include recordkeeping,
the hiring as well as management of onsite
security, janitorial and housekeeping staff. The
company also carries out the management of
condominium associations and homeowner
associations. Its clients include Sugar Hill,
Schooner Bay, Chelston Park, Speightstown
Mall and over 120 residential properties.
Altman Real Estate and Property Consultancy
Services Inc. together employ over 40 persons.
Fund History and Profile
Fortress Caribbean Property Fund Limited | Information Memorandum 33
9.1.6. Investment Committee
The Investment Committee has been
established by the Board. At present,
the members of this committee are Mr.
Geoffrey Cave, Dr. Trevor Carmichael and
Mr. Christopher de Caires. A quorum for
meetings of the Investment Committee is
a majority of its members. The Investment
Committee is responsible for reviewing
all investment recommendations made
by the Manager and, where appropriate,
recommending their approval to the Board.
The Investment Committee also has oversight
responsibility for monitoring existing
investments and recommending investment
policies and procedures to the Board for
approval.
9.1.7. Registrar, Secretary and Transfer
Agent
Fortress Fund Managers Limited acts as
Registrar, Secretary and Transfer Agent. Share
certificates will not be issued to sharehold-
ers. Ownership of the shares will be in non-
certificated form and maintained in electronic
form in the Barbados Central Securities
Depository INC. (BCSDI), a subsidiary of the
BSE.
9.1.8. Independent Valuers
Terra Caribbean performs semi-annual
independent valuations of the properties in
accordance with the procedures set by the
Fund’s Board of Directors and subject to the
approval of the BSE.
9.2. INVESTMENT GUIDELINES
The investment of the Fund will be directed
towards properties, which provide sound
income returns and/or potential for medium
or long-term capital appreciation. These may
include land, office and retail space, luxury
villas, or smaller residential developments.
The Fund will invest in mature properties
and development projects having regard to
the unique characteristics, which make them
sound investments. The Fund may also partner
with developers by investing in listed and
unlisted securities of property development
funds or companies, which are considered to
have significant capital growth potential.
The Fund may balance its exposure to
fluctuations in property values by also
investing in marketable securities such as
equities and government bonds, both locally
and internationally.
Foreign currency received by subscription
will, in whole or in part, be invested in such
securities traded on international markets.
Wherever the Directors consider that the
long-term returns on such investments exceed
those attributable to property, the Fund may
also invest substantially in them.
9.2.1. Investment Size and Return
The Fund will not normally invest in property
with a value of less than $500,000 as the
cost of managing small investments reduces
the yield to be earned from them. In order
to ensure portfolio diversification, the Fund
will also not normally invest in individual
properties with a value in excess of 40% of
the value of the Fund’s assets.
The Fund will seek to participate in projects
that demonstrate a return commensurate
with investment risk. Although the Fund will
consider a range of investments, each with a
different expected return, the Fund will not
invest in projects with a projected internal rate
of return of less than 10%.
34 Fortress Caribbean Property Fund Limited | Information Memorandum
9.3. THE INVESTMENT PROCESS
9.3.1. Investment Sourcing
The Board of Directors of the Fund, the Fund
Manager, and the Investment Adviser leverage
their extensive network of contacts in the real
estate industry to identify potential investment
opportunities. In addition, the Fund develops
working relationships with intermediaries, such
as real estate agents, bankers, accountants,
and lawyers, as well as the business community
in Barbados and the Caribbean in order to
create a referral base from which investment
opportunities will be generated.
9.3.2. Investment Evaluation
The Investment Adviser is responsible for
evaluating all investment opportunities that fall
within the Investment Guidelines of the Fund.
The Investment Adviser works with the Fund
Manager to prepare investment recommen-
dations on each potential opportunity to be
presented to the Fund’s Investment Committee
for approval.
The Investment Adviser conducts a detailed
appraisal on each investment it recommends
to the Fund. These appraisals include technical
and market evaluation, country risk assess-
ment, evaluation of potential partners or princi-
pals, financial analysis, legal due diligence, and
assessment of environmental issues.
The Investment Adviser works with the Fund
Manager to recommend the most appropri-
ate structure and terms and conditions of the
investment that would best protect the interests
of the Fund.
9.3.3. Property Management &
Monitoring
The Property Manager is responsible for
monitoring the real estate investments of the
Fund pursuant to the Property Management
Agreement. The Property Manager manages
all aspects of the ongoing operation of the
Fund’s real estate assets and their responsibili-
ties include: the collection of rents and other
income; payment of expenses relating to
normal operating expenses; leasing of space as
it becomes available for rent including advertis-
ing where necessary; hiring, supervising, and
administration of payroll for onsite personnel;
co-ordination of all necessary maintenance;
and, preparation of annual budgets and
reporting of the financial performance of
the properties on a monthly basis including a
summary of operations, a record of income, a
record of disbursements, and a narrative report
of operations including budget variances and
their causes.
In the event that a property that is acquired
by the Fund has an existing relationship with
a Property Manager, the manager will be
retained to provide the services as outlined
above provided that the Property Manager can
demonstrate to the Fund’s satisfaction that it
has the experience and expertise to provide
these services in an efficient and effective
manner.
Property management fees are on a contract
basis for each individual property and the costs
are borne out of the revenues of the individ-
ual properties. The fees are based on square
footage, and range from $1.50 to $2.50 per
square foot for retail and office space, and from
$0.80 to $1.00 per square foot for warehouse
space. Fees for residential properties are negoti-
ated on an individual property basis.
The monthly fee paid for property manage-
ment services for the Fortress portfolio is
presently $8,458. Such fees are determined by
the Fund Manager and approved by the Board
of Directors.
9.3.4. Divestment
The Investment Adviser will be responsible for
evaluating all divestment opportunities and
will present to the Board detailed recommen-
dations on such opportunities taking into
consideration market conditions, economic
returns, and future potential of the asset.
9.3.5. Valuation Policy
The assets of the Fund will be valued semi-
annually, or more frequently if the Directors
decide the circumstances warrant it. The net
asset value (NAV) per share will be calculated
monthly and reported by the BSE and any
other market on which the shares are traded.
Whilst the Fund is closed-ended, the primary
purposes of regular valuations are to monitor
the performance of the Investment Adviser,
provide information to the market, and
calculate ad valorem fees and expenses.
The fair market value of the real estate assets
will be determined by the independent valuer.
Fair market value is defined as:
The most probable price which a property
should bring in a competitive and open
market under all conditions requisite to a fair
sale, the buyer and seller acting prudently and
knowledgeably, and assuming the price is not
affected by undue stimulus.
Fund History and Profile cont’d
Fortress Caribbean Property Fund Limited | Information Memorandum 35
Implicit in this definition is the consummation
of a sale as of a specified date and the passing
of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well
advised, and acting in what they consider
their best interest;
3. a reasonable time is allowed for exposure
on the open market;
4. payment is made in terms of cash or in
terms of financial arrangements
comparable thereto; and
5. the price represents the normal
consideration for the property sold
unaffected by special or creative financing
or sales concessions by anyone associated
with the sale.
In determining the fair market value the
independent valuer will consider the following
three methods of valuation. Each of the
methods offers an indication of the value.
(a) Income Approach: Analysis of a property’s capacity to generate future benefits and the use of income capitalization to provide an indication of current value. In the direct capitalization approach, a single year’s income is converted to a value using a capitalization rate. In yield capitalization future cash flows are estimated and discounted to a present value using an appropriate discount rate.
(b) Replacement Cost Approach: Based on the existing construction, labour & other costs, the amount needed to replace the property if built at the valuation date.
(c) Sales Comparison Approach: Based on the going market rates for similar properties using actual recent transaction prices.
The independent valuer may engage the
services of a professional quantity surveyor
in order to assist with the replacement cost
approach.
9.3.6. Reports & Meetings
Unaudited reports are mailed to all sharehold-
ers on a semi-annual basis. Audited financial
statements are sent to all Shareholders within
90 days of the Fund’s financial year-end.
9.3.7. Conflicts of Interest
When the Manager or Investment Adviser
proposes an investment or when the Fund
reviews a proposal, there is potential for
conflict of interest to arise. The Fund proposes
to deals with such potential conflicts as
follows:
• All Directors of the Fund and the Manager
and Adviser have entered into various non-
disclosure, confidentiality and non-competition
agreements to preserve the confidential-
ity and commercial potential of prospective
investments.
• The Manager and Investment Adviser may
not during the term of the Management
Agreement and the Investment Adviser
Agreement manage or provide advice in
relation to other fund(s) or investment
companies, the principal objectives of which
are to invest in real estate assets in Barbados
and the Caribbean, and which significantly
compete directly with the Fund in business,
geographical coverage or in any other way
unless either at least 75 per cent of the
Fund’s capital is invested or committed for
investment in real estate assets or the Board
of the Fund comprising Directors independent
of the Manager or Investment Adviser have
approved such appointment.
• The Fund may not invest in assets owned,
advised or managed by the Manager or
Investment Adviser or any subsidiaries or
affiliates of the Manager or Investment Adviser
until these interests have been disclosed to the
Board of the Fund.
• The Manager and Investment Adviser will
ensure that the Fund has the opportunity to
participate in investment opportunities which
are consistent with the Investment Guidelines
and which are known to them during the
terms of the Management Agreement and
the Adviser Agreement.
• Where a Board member, the Manager or the
Investment Adviser has any involvement in a
proposed investment or in a related competing
business, such as is likely to affect their
judgement of the proposal, the involvement
will be declared to the Board of Directors. The
Board will decide by simple majority whether
the involvement is sufficient to preclude the
party concerned from further involvement in
the investment decision. The disclosure and
further considerations will be recorded in the
minutes of the relevant meeting.
• Where the Investment Adviser is represent-
ing a third party vendor to the Fund, the
involvement will be declared to the Board of
Directors. The Board will decide by simple
majority whether to preclude the Investment
Adviser concerned from further involvement
in the investment decision. The disclosure and
further considerations will be recorded in the
minutes of the relevant meeting.
36 Fortress Caribbean Property Fund Limited | Information Memorandum
9.4. INVESTMENT RESTRICTIONS &
BORROWING POWERS
The Directors of the Fund have approved the
following investment restrictions and borrow-
ing powers. These may be varied from time
to time by the Directors, once notice of any
impending changes has been given to share-
holders.
• Borrowings will be restricted to 40% of
the appraised value of the Fund’s assets.
• The Fund will not make loans.
• The Fund will not lend its portfolio assets.
• The Fund will not invest in mortgages or
other debt instruments secured by real
estate.
• The Fund will be empowered to invest in
real estate, listed and unlisted shares of
companies whose primary business relates
to the development, ownership, manage
ment or rental of properties.
• Liquid investments will be in the form of
Government & commercial debt, bank
deposits and shares of open-ended
mutual funds.
Description of Share Capital of the Fund
The authorised capital of the Fund consists of
an unlimited number of Class “A” Common
Property Fund Shares and 10 Class “B” Shares.
The Fund currently has 33,490,261 Class “A”
shares and 10 Class “B” shares in issue.
The following is a summary of the mate-
rial provisions attaching to the shares of the
Fund.
Class “A” Shares
Liquidity:
Holders of Class “A” Shares can trade their
shares on the BSE. Class “A” Shares are not re-
deemable by the Fund, and accordingly inves-
tors have no guarantee of liquidity with respect
to their investment in the Fund. The Fund has
no obligation to make a market for its shares.
Dividends:
Holders of Class “A” Shares are entitled to re-
ceive dividends at the discretion of the Board.
Voting Rights:
Holders of Class “A” Shares are entitled to
receive notice of and attend all meetings of
shareholders of the Company but not to vote
at any such meeting except on the following
matters:
i. the liquidation of the Fund; or
ii. the winding up of the Company or
iii. the reconstruction of the Company,
and/or the amalgamation of the
Company and/or the Fund with any
other company or mutual fund.
Fractional Shares:
A holder of a fractional Share is entitled to
receive dividends in respect of such fractional
share to the extent of such fraction.
Dissolution:
Upon liquidation, dissolution or winding up of
the Company or other distribution of the assets
of the Company for the purpose of winding up
its affairs, the holders of the Class “A” Shares
shall be entitled to receive after payment of all
liabilities of the Company and the then stated
capital of Class “B” Shares, any remaining as-
sets of the Company to be divided amongst
the Class “A” Shares.
Class “B” Shares (Held by the Manager and
Investment Adviser)
Issue:
The Class “B” Shares may be issued only to the
Manager and Investment Adviser.
Dividends:
Holders of Class “B” Shares are not entitled to
receive dividends.
Voting Rights:
Holders of Class “B” Shares are entitled to the
right to receive notice of and attend all meet-
ings of shareholders of the Fund; the right to
vote at any such meeting. Each Class “B” share
entitles the holder to one vote per share.
Fractional Shares:
A holder of a fractional Class “B” Share is en-
titled to exercise voting rights in respect of such
fractional share to the extent of such fraction.
Dissolution:
On the liquidation or dissolution of the Fund,
or other distribution of the assets of the Fund
for the purpose of winding up its affairs, the
holders of Class “B” shares will be entitled,
after payment of all liabilities of the Fund, to
receive the stated capital of their shares.
9.5. TRADING IN THE FUND’S SHARES
Fortress Caribbean Property Fund is a closed
end fund. Investors wishing to liquidate their
investment in whole or in part, can sell their
shares through a broker on the BSE. Shares
cannot be redeemed at the offices of the
Manager as is the case with an open end fund.
Similarly an investor wishing to make an ad-
ditional investment in the Fund’s shares should
place an order through a broker on the BSE.
There can be no guarantee that on any trad-
ing day there will be buyers and sellers for the
Fund’s shares.
Fund History and Profile cont’d
Fortress Caribbean Property Fund Limited | Information Memorandum 37
As supply and demand for the Fund’s shares
will fluctuate with market conditions, it is
likely that the Fund’s shares will trade at a
premium or discount to the net asset value of
the Fund. If shares trade at a premium for a
consistent period of time, additional tranches
may be issued. If shares trade regularly at
a significant discount, consideration will be
given to the Manager buying back shares,
either for onward sale or cancellation with
the aim of enhancing shareholders’ value. The
maximum amount of shares that the Fund is
allowed to buy back in a year’s time is 15% of
the outstanding shares. Any such buyback will
be subject to the conditions outlined in Section
4 of the Companies Amendment Act 2001-30.
The benefits of purchasing shares for cancella-
tion will accrue to the Fund.
9.6. FEES & EXPENSES
9.6.1. The Manager
The Manager is paid a fee of 0.75% of the
total net assets of the Fund per annum. The
fee is calculated on the total net assets of the
Fund based on the semi-annual valuation and
monthly adjustments that take into account
revenues and expenses of the Fund. The fee
is paid monthly and adjusted retroactively at
the semi-annual valuation date to take into
account any significant changes in the total
net assets.
9.6.2. The Investment Adviser
The Investment Adviser is paid a fee that is
equivalent to 0.75% of the total net assets of
the Fund per annum. The fee is calculated on
the total net assets of the Fund based on the
semi-annual valuation and monthly adjustments
that take into account revenues and expenses of
the Fund. The fee is paid monthly and adjusted
retroactively at the semi-annual valuation date to
take into account any significant changes in the
total net assets.
9.6.3. The Independent Valuer
The Independent Valuer is paid a fee that is
calculated on the appraised values of the specific
properties being valued. The fee for all new
properties added to the Fund will be 0.2% of
the appraised value. Subsequently each property
will be valued twice per year and the fee shall be
0.035% of the appraised value of the property.
Any property that undergoes substantial
redevelopment may be subject to a full valuation
fee of 0.2% but this shall depend on the extent
of the redevelopment.
9.6.4. Transaction Costs
When the Fund sells real estate it will pay a sales
commission to real estate agents who introduce
a purchaser. Where a purchaser is introduced by
the Investment Adviser, Altman Real Estate, the
commission will be at a rate of 3% of the value of
the transaction. Where the purchaser is introduced
by another agent, the rate of commission will be
negotiated up to a maximum of 5%.
Divestment of the Fund’s assets will attract stamp
duty of 1% and legal fees based on a sliding scale,
the maximum rate being 2.0% declining to 1.0%,
as outlined in the Legal Profession Act CAP 370A
S.I. 1997 no. 55 (Attorney-at-Law remuneration
for non-contentious business rules 1997).
9.6.5. Estimated Expenses of the
Rights Issue
The expenses of the Rights Issue will be borne
by the Fund and are not expected to exceed
1.5% of the value of the shares provisionally
allocated.
9.7. DIVIDEND POLICY
The Board of Directors of Fortress Property Fund
Limited may declare, from time to time, such
cash dividends, out of monies legally available
for dividends, as it may consider advisable. It
is the policy of the fund to distribute 30% to
65% of its net income to shareholders.
9.8. TAXATION OF THE FUND
The Fund is licensed as an authorised mutual
fund under the Mutual Funds Act 2002-22 in
Barbados. Consequently, the Fund will not be
subject to corporation tax on the income or
profits derived from its investments provided it
designates all of such income or profits arising
in an income year to be the income of the
shareholders. In addition there is presently no
Capital Gains Tax in Barbados and, therefore,
capital gains realised by the Fund will not be
subject to tax.
The Fund will be exempt from tax in respect
of dividends received from investments in
companies located in countries within the
Caribbean Community (CARICOM) which
have ratified the CARICOM Double Taxation
Agreement (i.e. Antigua, Belize, Dominica,
Grenada, Guyana, Jamaica, St. Kitts and Nevis,
St. Lucia, St. Vincent and Trinidad and Tobago).
Fund History and Profile cont’d
38 Fortress Caribbean Property Fund Limited | Information Memorandum
9.9. TAXATION OF THE SHAREHOLDERS
Dividends
The investors in the Fund will not be subject
to tax in Barbados on the income arising
from the Fund which is designated by the
Fund to be the income of the investors and
which is not actually distributed to them.
Any dividends paid by the Fund to individual
residents in Barbados will be subject to a final
withholding tax of 12.5 %. Under the Income
Tax (Amendment) (No.3) Act 1998, dividends
paid by the Fund to a Barbadian corporation,
or to a non-resident Caricom shareholder are
exempt from withholding taxes.
Capital Gains
There is presently no capital gains tax in
Barbados. Therefore, investors will not be
subject to tax in Barbados on capital gains
derived on realisation of their investment in
the fund.
Property Transfer Tax and Stamp Duty
Under the Mutual Funds Act 2002-22, an
investor in the fund will be exempt from
Property Transfer Tax and Stamp Duty, as
defined in the Property Transfer Tax Act CAP
84A and the Stamp Duty Act CAP 91, in
respect of the acquisition and transfers of their
shares in the fund.
9.10. FOREIGN EXCHANGE CONTROL
Barbados has a regime of exchange control
regulations administered by the Central
Bank. These regulations require that residents
convert foreign currency receipts to Barbados
dollars and purchase their foreign currency
requirements for goods and services from
the commercial banks who have delegated
authority to sell foreign exchange on behalf
of the Central Bank. Since 1975, Barbados
has maintained a fixed exchange rate of
BDS$ 2.00 to US$1.00.
As the shares of the Fund are listed on the
BSE, CARICOM resident shareholders will be
permitted to purchase and sell shares of the
Fund up to US$ 1.5 million per transaction
without prior approval from the Central Bank.
As an Authorised Mutual Fund, the Fund will
be able to make investments in assets outside
of Barbados denominated in foreign currency.
The Fund can apply to the Central Bank for
permission to invest up to a maximum of
$250,000 per quarter outside of the Caribbean.
In addition, the Fund can also invest an amount
equal to all foreign currency raised through the
issuance of shares in assets outside of Barbados
denominated in foreign currency.
9.11. TAX INCENTIVES
In an effort to stimulate the capital markets
in Barbados and increase the levels of local
domestic savings, the Minister of Finance has
implemented tax incentives for individuals
to invest in mutual funds and new shares of
public companies.
Investment in a Mutual Fund – Up to
$10,000
Barbadian resident individuals are permitted to
claim up to $10,000 per annum for investment
in shares of mutual funds or new shares of a
public company. Disposal of these shares
within five years will result in the recapture of
the tax relief given.
Restrictions on the Tax Incentives
Investment in shares pursuant to this Rights
Issue will qualify for these tax incentives as
either a mutual fund or as new shares in a
public company. However, once the issue has
been closed, the Fund will be operated as a
closed-end mutual fund and the shares issues
will be freely traded on the BSE. Therefore a
person purchasing shares through the BSE
will not be entitled to tax incentives on those
shares.
Depending on the demand for the Fund’s
shares, it is expected that periodically, the
Directors of the Fund will make subsequent
offers of new shares available in order to
increase the equity and asset base of the Fund.
These subsequent offers will be issues of new
shares of the Fund and these will qualify as
new shares of a public company and therefore
will be eligible for the incentives listed above.
The above information is provided
with the understanding that the Fund
is not engaged in rendering tax or
other professional services or advice.
The comments provided herein are not
intended to constitute, nor should they be
relied upon, to replace specific profession-
al advice.
Fund History and Profile cont’d
Fortress Caribbean Property Fund Limited | Information Memorandum 39
10. DIRECTORS OF THE FUND AND THEIR INTERESTS
Directors’ interest (all beneficial)Name No. of Class “A” Shares held
Mr. Paul Altman, B.C.H. 308,333
Dr. Trevor Carmichael,Q.C., S.C.M. 26,333
Mr. Geoffrey Cave, C.B.E., B.C.H. 12,000
Mrs. Maureen Davis 20,333
Mr. Christopher de Caires, FCA, MBA Nil
Mr. Terry Hanton, FCA Nil
11. SUBSTANTIAL INTERESTS
Interest of persons other than Directors hold-
ing more than 5% of the issued shares
The Barbados Shipping
& Trading Co. Limited 3,000,000
The Bank of N.T. Butterfield
& Sons Ltd. 1,666,700
12. MATERIAL CONTRACTS
The Fund has entered into the following con-
tracts which are material to investors prior to
the date of this offering:
a) The Management Agreement
b) The Investment Adviser Agreement
c) The Independent Valuer Agreement
d) The Property Management Agreement
Copies of the foregoing will be available for
inspection during regular business hours on
any weekday (Saturdays, Sundays and pub-
lic holidays excepted) at the principal place
of business of the Fund at 1st Floor Carlisle
House, Hincks Street, Bridgetown, Barbados
from the opening date of the Rights Issue, un-
til the closing date.
13. CONSENTS
The following have given and have not with-
drawn their written consent in connection
with the inclusion in this Rights Issue Informa-
tion Memorandum of the information they
provided in the form and context in which it
is included:
• Altman Real Estate
• Fortress Fund Managers Limited
• Juris Chambers
• PricewaterhouseCoopers
• Property Consultancy Services Inc.
• Terra Caribbean
• Signia Financial Group Inc.
• Cave Shepherd & Co. Ltd.
• FirstCaribbean International Bank (Barbados) Limited
• Fortress Caribbean Growth Fund
• Fortress Caribbean Pension Fund Limited
• Carter Holdings Limited
• Carter & Co. Ltd.
Copies of these consents have been lodged
with the Registrar of Companies as required
pursuant to subsection (2) of section 292 of
the Companies Act.
40 Fortress Caribbean Property Fund Limited | Information Memorandum
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Fortress Caribbean Property Fund Limited | Information Memorandum 41
14. FORMS FOR SHAREHOLDERS’ ATTENTION
14.1. PROVISIONAL LETTER OF ALLOTMENT
FORTRESS CARIBBEAN PROPERTY FUND LIMITED
Rights Issue of 22,326,840 Class “A”Common Property Fund shares [New Shares]At an Issue Price of Bds$ 1.40 per shareTo Shareholders of Record as at September 30th, 2005
October 3rd, 2005
Dear Shareholder
This letter is pursuant to the resolution of the Board of Directors of Fortress Caribbean Property Fund Limited passed on June 1st, 2005 with respect
to the issue and offer for sale of a Rights Issue of two (2) new Class “A” common shares for every three (3) shares held by shareholders at the close
of business on September 30th, 2005 at an issue price of Bds$1.40 per share, payable in full on acceptance.
As a consequence thereof, you have been provisionally allotted the number of new shares indicated on the reverse of this Provisional Letter of
Allotment.
The terms of the Rights Issue, material information relating thereto and the procedures for acceptance, sale and renunciation, whether in whole or
in part, and Application for Excess Shares are contained in Section 5 of this Information Memorandum of which this letter is an integral part.
For convenience, you should note that you may accept all, none or part of your allotment. If you decide to accept only part of your
allotment, you will be deemed to have renounced your right to the part which you do not wish to take up.
New shares will be issued ex-dividend.
The form of receipt contained on the reverse of this Provisional Letter of Allotment will be completed by Fortress Fund Managers Limited or on its
behalf Signia Financial Group Inc. and returned to the person lodging it.
By Order of the Board,
Fortress Caribbean Property Fund Limited
…………………………………………..
Fortress Fund Managers Limited
COMPANY SECRETARY
42 Fortress Caribbean Property Fund Limited | Information Memorandum
Acknowledgement of Receipt (Tick [ ] box, where applicable).
Receipt is hereby acknowledged of the following:
Form of Acceptance (Form A)
Number of shares accepted …………………….........................@ Bds$1.40/share = Remittance Bds$……………………..................................
(Eg. 1000 @ Bds$1.40/share = Remittance Bds$1400.00)
Application for Excess Shares (Form C)
Number of shares applied for…………………….......................@ Bds$1.40/share = Remittance Bds$……………………......................................
………………………………………………………..For and on behalf ofFortress Fund Managers LimitedManager to the Issue
* NOTE: If you wish to accept less shares than the number provisionally allotted to you, please enter the number you wish to accept
Rights Issue of 22,326,840 Class “A” Common Property Fund sharesAt an Issue Price of Bds$ 1.40 per shareTo Shareholders of Record as at September 30th, 2005
To be lodged on or before 5:00 pm October 28th, 2005
To: the Directors of Fortress Caribbean Property Fund Limited (the Fund)
Having paid to the Fund the sum of Bds$ ……………………….. being Bds$1.40 per share on acceptance of ……………….. Class “A” common property fund shares in the Fund, I / we hereby request that the above number of shares be allotted to me / us and I / we agree to accept the said shares upon the terms and conditions of the Information Memorandum dated October 3rd, 2005 and subject to the Articles of Incorporation and By-laws of Fortress Caribbean Property Fund Limited.
Signature: ……………………………….............................................. Signature: ……………………………….................................................
Name: ....……………………………….............................................. Name: ……………………………….....................................................
B’dos I.D. #………………………………............................................. B’dos I.D. #: …………………………..…………………………..............
Address: ………………………………................................................ Address: …………………………….……………...................................
………………………………................................................ ………………………………..................................................
Date: ………………………………..................................................... Date: ………………………………........................................................
Cheques are to be made payable to “FCPF Rights Issue”
FOR OFFICIAL USE ONLY AGENCY
NO. OF SHARES ACCEPTED
14.2. Form Of Acceptance – Form AFORTRESS CARIBBEAN PROPERTY FUND LIMITED
Fortress Caribbean Property Fund Limited | Information Memorandum 43
44 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 45
Rights Issue of 22,326,840 Class “A” Common Property Fund sharesAt an Issue Price of Bds$ 1.40 per share
To be lodged with your broker on or before 9:00 am on October 21st, 2005.
NB – Insert your total allotment/entitlement to shares pursuant to this rights issue under (X) below; Insert the number of shares which you do NOT wish to purchase pursuant to this rights issue, and which you therefore wish to sell, under (Y) below
To: ____________________________________________________________
[Name of your stockbroker]
Pursuant to the above mentioned rights issue, I / we are entitled to (X) ……………… Class “A” common property fund shares in accordance with
the Provisional Letter of Allotment attached.
However, I / we have renounced my/our right to an allotment of (Y) ………………… Class “A” common property fund shares and hereby request
that you sell on my / our behalf the rights to the said (Y)………………. shares on the Floor of the Barbados Stock Exchange.
(Name(s) and address(es) of the transferee(s) to be printed in BLOCK LETTERS provided hereunder).
Signature: ……………………………….............................................. Signature: ……………………………….................................................
Name: ....……………………………….............................................. Name: ……………………………….....................................................
Address: ………………………………................................................ Address: …………………………….……………...................................
………………………………................................................ ………………………………..................................................
………………………………................................................ ………………………………..................................................
Date: ………………………………..................................................... Date: ………………………………........................................................
14.3. Instruction To Sell Rights [Form Of Renunciation] – Form BFORTRESS CARIBBEAN PROPERTY FUND LIMITED
46 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 47
This form is to be used ONLY by Class “A” common shareholders registered in the books of the Fund at the close of business on September 30th, 2005, who desire to apply for any shares that may remain available after providing for acceptance under Provisional Allotment Letters.
AVAILABLE UNTIL 5:00 pm on OCTOBER 28th, 2005 AFTER WHICH NO APPLICATION CAN BE ENTERTAINED
To: the Directors of Fortress Caribbean Property Fund Limited (the Fund)
I / we am / are not a citizen(s) of Barbados and was / were a registered shareholder(s) of Fortress Caribbean Property Fund Limited on September 30th, 2005.
I / we hereby offer to purchase …………….. Class “A” common property fund shares offered for sale to existing shareholders of the Fortress Caribbean Property Fund Limited at a price of Bds$1.40 per share in accordance with their letter of allotment and I / we hereby undertake to agree to accept the same or any less number of such shares that may be sold to me / us. I / we understand that allotment of any such shares will be at the sole discretion of the Fund.
I / we hereby authorize you to send a refund cheque for any surplus application by post at my / our risk to the address first written below and to enter my / our name(s) in the Register of Shareholders of Fortress Caribbean Property Fund Limited as the holder(s) of the number of shares hereby sold to me / us.
Signature: ……………………………….............................................. Signature: ……………………………….................................................
Name: ....……………………………….............................................. Name: ……………………………….....................................................
B’dos I.D. #………………………………............................................. B’dos I.D. #: …………………………..…………………………..............
Address: ………………………………................................................ Address: …………………………….……………...................................
………………………………................................................ ………………………………..................................................
Date: ………………………………..................................................... Date: ………………………………........................................................
Note: This application should be forwarded with a separate remittance to Fortress Fund Managers Limited or Signia Financial Group Inc., to reach
them not later than 5:00 pm on October 28th, 2005. Cheques are to be made payable to “FCPF Rights Issue”
Amount of remittance: Bds$ ……………………………
14.4. Application For Excess Shares – Form CFORTRESS CARIBBEAN PROPERTY FUND LIMITED
48 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Caribbean Property Fund Limited | Information Memorandum 49
15. CORPORATE INFORMATION
DIRECTORS
Mr. Geoffrey Cave, C.B.E., B.C.H.
Mr. Paul Altman, B.C.H.
Dr. Trevor A. Carmichael, Q.C., S.C.M.
Mrs. Maureen Davis
Mr. Christopher de Caires, FCA, MBA
Mr. Terry Hanton, FCA
FUND MANAGER, SECRETARY, REGISTRAR &
TRANSFER AGENT
Fortress Fund Managers Limited
1st Floor Carlisle House
Hincks Street
Bridgetown
Barbados
REGISTERED OFFICE
1st Floor Carlisle House
Hincks Street
Bridgetown
Barbados
BANKER
FirstCaribbean International Bank
(Barbados) Limited
Broad Street
Bridgetown
Barbados
INDEPENDENT VALUER
Terra Caribbean
Ernst & Young Building
Worthing
Christ Church
Barbados
ATTORNEYS-AT-LAW
Sir Henry Forde, K.A., Q.C.
Juris Chambers
Fidelity House
Wildey Business Park
St. Michael
Barbados
Mr. Garth Patterson
LEX Caribbean
Worthing
Christ Church
Barbados
INVESTMENT ADVISER
Altman Real Estate
Derricks
St. James
Barbados
PROPERTY MANAGER
Property Consultancy Services Inc.
Derricks
St. James
Barbados
INDEPENDENT AUDITORS
PricewaterhouseCoopers
The Financial Services Centre
Bishop’s Court Hill
St. Michael
Barbados
Corporate Information
Fortress Caribbean Property Fund Limited | Information Memorandum 49
50 Fortress Caribbean Property Fund Limited | Information Memorandum
Fortress Fund Managers Limited1st Floor Carlisle House, Hincks Street, Bridgetown, Barbados W.I.
Tel (246) 431 2198 Fax (246) 431 0514
www.fortressfund.com